January 26, 2008 in Business

Steadying advice

Tim Paradis Associated Press
 

NEW YORK – Don’t panic.

That advice could probably serve as a stand-in for “hello” at many brokerages these days. With Wall Street stumbling – particularly since the beginning of the year – uneasy investors are calling on financial advisers with an urgency not seen since the start of the decade.

Like last time, when the economy was reeling from the flameout of technology stocks and the Sept. 11 terrorist attacks, long-term investors who can resist giving in and selling out will likely emerge the strongest.

But as before, the latest stock market pullback has unnerved individual investors, many of whom are ferrying money from equities into bonds and cash. In the week that ended Jan. 15, when many analysts were predicting an imminent cut in interest rates, assets in money market funds ballooned by $15.96 billion to a high of $3.17 trillion, according to iMoneyNet.

And investors pulled an estimated $18.2 billion from mutual funds and exchange-traded funds last week, according to TrimTabs Investment Research. So far this year, investors have shifted $41.4 billion out of these investments.

While those who removed money out of the market after the dismal numbers seen in recent weeks might be happy, they could be left smarting if they try to time the market but miss a rebound.

“If you have a three- to five-year time horizon and longer I would say there is very little you should really do,” said Dave Stepherson, senior portfolio manager at Hardesty Capital Management in Baltimore. “These knee-jerk sell decisions are extremely unhealthy at these points. In fact, you should be doing the opposite,” he said.

He said he tells nervous clients to pay attention to the markets, but so that they can detect opportunities in solid investments that have sold off, not to simply react to daily ups and downs.

The Dow Jones industrial average is down nearly 10 percent just this year, and well off its October highs. The same is true for the broader Standard & Poor’s 500 index – the benchmark that many mutual funds track and are measured against. The S&P has lost more than 10 percent for the year and the technology-heavy Nasdaq composite index has fallen more than 13 percent since 2008 began.

Investors – faced with wrenching pullbacks in the value of investments like 401(k) plans – have watched with alarm.

Ken Jackson, 68, of Hillside, N.J., rolled his eyes at the thought of receiving his next financial statement, which is due any day now. As a mortgage consultant, he watches the stock market closely, but said he doesn’t let its peaks and valleys dictate his personal spending or handling of his investments.

“I’m pretty much a steady spender. I don’t worry too much about what’s going on in the market,” referring to his day-to-day spending.

Jackson said he remains confident enough in a market correction that he’d reprise a bet he made with a friend about five years ago, when the Dow sank below 9,000 points. He wagered a helping of chocolate ice cream that the index would bounce

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